India dangerously close to ‘Hindu rate’ of growth, former central bank governor

New Delhi, March 05, 2023 (PPI-OT): Former Reserve Bank Governor Raghuram Rajan has said that India is “dangerously close” to the Hindu rate of growth in view of subdued private sector investment, high interest rates and slowing global growth.

Mr. Rajan said that sequential slowdown in the quarterly growth, as revealed by the latest estimate of national income released by the National Statistical Office (NSO) last month, was worrying.

Hindu rate of growth is a term describing low Indian economic growth rates from the 1950s to the 1980s, which averaged around 4%. The term was coined by Raj Krishna, an Indian economist, in 1978 to describe the slow growth.

The Gross Domestic Product (GDP) in the third quarter (October-December) of the current fiscal slowed to 4.4% from 6.3% in the second quarter (July-September) and 13.2% in the first quarter (April-June).

The growth in the third quarter of the previous financial year was 5.2%.

“…I am worried about the sequential slowdown. With the private sector unwilling to invest, the RBI still hiking rates, and global growth likely to slow later in the year, I am not sure where we find additional growth momentum,” Mr. Rajan said in an email interview to the Indian news agency PTI.

The key question is what Indian growth will be in fiscal 2023-24, Mr. Rajan said, adding “I am worried that earlier we would be lucky if we hit 5% growth. The latest October-December Indian GDP numbers (4.4% on year ago and 1% relative to the previous quarter) suggest slowing growth from the heady numbers in the first half of the year.

“My fears were not misplaced. The RBI projects an even lower 4.2% for the last quarter of this fiscal. At this point, the average annual growth of the October-December quarter relative to the similar pre-pandemic quarter 3 years ago is 3.7%.

“This is dangerously close to our old Hindu rate of growth! We must do better.” The government, he said, was doing its bit on infrastructure investment but its manufacturing thrust is yet to pay dividends.

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